2020 (2) TMI 1376 - HC - Customs

Cancellation of the petitioner s advance licence - suspension of the IEC of the petitioner till the amount of customs duty plus interest claimed to be due is paid by the petitioner - HELD THAT - Clause D of Hand Book of procedures in respect of para 2.4 of the Export and Import Policy 2002-2007 provides that even the fuel is included as an import under SION, it should not be taken into account while fixing the DEPB rate for such products against which fuel has been allowed as an input. The petitioner has imported fuel under the Advance Licence Scheme and even admittedly he has not imported any other raw material under that scheme. The petitioner has not availed any benefit under the Advance Licence Scheme. Once the petitioner performs export obligation of ₹ 30 crores on the cost of ₹ 2.10 crores which he has incurred for importing fuel, there is no obligation on the petitioner to pay any duty on the said fuel. The petitioner would be entitled to payment of duties under DEPB scheme which he has paid on the raw material used in the manufacture of final product. When admittedly, the petitioner has not imported any raw material other than the fuel under the Advance Licence Scheme, which is excluded as per the amended provision, the net result is the petitioner has not availed any benefit under the Advance Licence Scheme. To avail the benefit of both Advance Licence Scheme and DEPB scheme, the petitioner has to perform the export obligation of ₹ 30 crores which he has fulfilled. The petitioner has purchased the raw material which has gone into use of manufacturing products and therefore, the petitioner is entitled for refund of the said duty paid. If the petitioner opts for duty Drawback Scheme the rate at which he is entitled to the duty drawback is 3% and under DEPB Scheme, he is entitled to 4%. The petitioner availed DEPB scheme which is favourable to him. The Learned Single Judge has rightly held that the petitioner has not imported any raw material other than fuel under the Advance Licence Scheme which is excluded as per the amended provision - Appeal dismissed.

Summary

Issues:
Challenge to arbitrary and illegal actions of respondent, Cancellation of license and IEC suspension, Duty exemption schemes, DEPB benefits, Advance license for fuel import, Compliance with export obligations, Appellate authority's decision, Writ petition outcome, Interpretation of Foreign Trade Policy provisions.

Detailed Analysis:

1. Arbitrary and Illegal Actions: The petitioner, a Public Limited Company engaged in manufacturing and exporting foundry products, challenged the arbitrary and illegal actions of the respondent ordering cancellation of the petitioner's license and suspension of the Import Export Code (IEC) until claimed dues were paid. The respondent also refused to issue further licenses under any duty exemption scheme until dues were settled.

2. Advance License for Fuel Import: The petitioner obtained an advance license for importing duty-free fuel (furnace oil) for a captive power plant. The license was granted under the Actual User Condition as permitted by the Foreign Trade Policy, subject to specific terms and conditions.

3. DEPB Benefits: The Foreign Trade Policy provided Duty Entitlement Pass Book (DEPB) benefits to neutralize customs duty on export products. The petitioner was entitled to duty credit based on a percentage of the Free On Board (FOB) value of exports. The scheme aimed to offset customs duty on the import content of the export product.

4. Compliance with Export Obligations: The petitioner fulfilled export obligations by exporting High Chromium Grinding Media Balls (HCGMB) against the advance license. The petitioner submitted necessary documents to support the fulfillment of export obligations, including original advance license, shipping bills, and bank realization certificates.

5. Appellate Authority's Decision: The respondent issued a show cause notice and subsequently an ex parte order canceling the advance license, suspending the IEC, and ordering payment of customs duties plus interest. The petitioner appealed the decision, which was rejected by the appellate authority, leading to the filing of a writ petition.

6. Writ Petition Outcome: The Learned Single Judge allowed the writ petition, quashing the appellate authority's order. The judge directed the respondent to accept exports towards fulfilling obligations under the advance license, restore the IEC, withdraw the license cancellation, and refund the amount promptly.

7. Interpretation of Foreign Trade Policy: The High Court analyzed the provisions of the Foreign Trade Policy, specifically regarding the import of fuel under the Advance License Scheme. The Court emphasized that the petitioner had not imported any raw material other than fuel under the scheme, making them eligible for DEPB benefits.

8. Judgment: After examining the records and the Single Judge's order, the High Court upheld the decision, stating that the petitioner had not availed benefits under the Advance License Scheme apart from fuel import. The Court found the original and appellate authorities' orders to be arbitrary and perverse, leading to the dismissal of the writ appeal.

In conclusion, the High Court's judgment affirmed the petitioner's entitlement to DEPB benefits based on fulfilling export obligations and importing fuel under the Advance License Scheme. The Court emphasized compliance with policy provisions and rejected the appeal, upholding the Single Judge's decision.